Obama's Budget Strategy

April 22, 2011

At the White House’s highest levels, officials share the belief that Ryan’s blueprint will be a fulcrum of the 2012 debate. The White House wants to keep attention on Ryan by pursuing a deal with Republicans linked to the debt-ceiling increase that would commit both sides to a target for deficit reduction, establish a fail-safe mechanism to enforce the target, and then tee up an extended debate in 2012 about how to reach those fiscal goals.

The White House believes it can win that argument because Ryan’s commitment to large tax reductions requires him to impose much deeper, politically incendiary spending cuts than Obama embraced in his deficit plan last week—such as Ryan’s proposal to replace the existing Medicare program for Americans under 55 with a voucher (or “premium-support”) system.

That sounds like a smart strategy. They're not counting on winning a grand bargain, which I think will be extremely hard to do. They just need an overall framework requiring and enforcing lower deficits. Once you've agreed to impose a framework for reducing the deficit, you can move the terrain away from Paul Ryan's syllogistic defense of his proposal (1. Doing something about the debt is necessary, 2. My plan is something, 3. We must do my plan.) And then you can move onto the question of specific policy choices, where Obama enjoys an overwhelming advantage over Ryan's wildly unpopular proposal to slash Medicare spending more than needed for the purposes of debt reduction in order to hold down taxes for the rich.

And part of what we have to do with our tax code is also end some of the tax cuts that were instituted for the wealthiest Americans. (Applause.) Now, I say that not because I want to punish success. I’m rooting for everybody to get rich. But I believe that we can’t ask everybody to sacrifice and then tell the wealthiest among us, well, you can just relax and go count your money and don’t worry about it; we’re not going to ask anything of you.

I’ve been incredibly blessed by this country -- son of a single mom, went on scholarships to get through school. And so the fact that I’m now well off, I want to be able to give a little bit something back so that the next generation can achieve that same success. I don’t need additional tax cuts, especially when I know that extending those tax cuts may end up meaning that some senior citizens are getting less health care; or thousands of kids on Head Start might not have that opportunity available to them; or people who are on Medicaid, seniors who are in nursing homes, or families who have got a child who’s autistic or disabled, that somehow they’re left to fend for themselves. That’s not a good option, from my perspective. That’s not a trade-off I’m willing to make.

And I don’t believe it’s a trade-off that most Americans are willing to make -- no matter what party you belong to. That’s not who we are as a country. We are better than that. We don’t allow people who are vulnerable just to sink further and further without giving them a little bit of a hand up. It’s part of what has made this country great.

That sounds like a winning strategy. The key, as I've argued before, is to fight the Republicans to a standoff over the Bush tax cuts. If Obama insists on not a dime of tax cuts for income over $250,000, the Republicans will insist on not a dime for anybody. Then Obama can pin the failure of the universal tax cuts on the Republicans -- if they really favor it, why not pass that instead of holding it hostage to tax cuts that only help the rich -- and still get a policy win when the whole thing expires and revenue shoots up. Then win reelection -- which, to be sure, is looking a little dicey right now -- and cut a deal to make some modest spending cuts and boom, you're done.

The upside is that, if they manage to pass some actually enforceable budget restraints, then Obama doesn't have to win reelection. You're still setting up a fixed-sum budget debate where every dollar of upper-income tax cuts needs to come out of something else. That's a world where Democrats hold the public opinion high ground in any fight, since tax cuts for the rich are highly unpopular and most spending is highly popular. So even under a Republican president, Democrats in the Senate would have a chance to hold their ground.